Diesel is cheaper than regular gas right now thanks to a 'freight recession'
CBC
After soaring to record highs last year, diesel prices have fallen significantly in recent months, which experts say could signal a slowdown economy.
A downturn in the trucking and rail industries is one of the reasons the price of diesel has fallen by about one-third in the last six months. Cheaper fuel prices could help cool the rate of inflation and provide some relief to consumers.
Many farmers are noticing the trend, especially as they work long hours in the seat of their tractors during spring seeding.
"There's been a huge drop in diesel prices," said Stephen Vandervalk, who receives diesel deliveries by the 52,000-litre truckload to his farm near Fort Macleod, in southern Alberta.
So far, he's planted about 60 per cent of this year's malt barley, durum wheat and canola crops on his 4,000 hectares of land.
"It makes a big difference, for sure," he said, adding he hopes prices continue to fall to more normal levels.
The average retail price of diesel across the country was $2.30 per litre in November compared to about $1.53 per litre this week. Over the same time period, regular gasoline has decreased by a much smaller amount, from $1.74 to $1.59.
Commodity prices spiked in 2022 following Russia's invasion of Ukraine.
After all of the supply chain problems around the globe in recent years, experts say those logistical challenges have been resolved and the transportation industry is now facing what they call a 'freight recession.'
Around the globe, the shipping industry is experiencing a drop in demand and rates. Shipping giant Maersk has started cutting vessel speeds to save on fuel bills and reduced the number of ships it charters in an attempt to limit costs.
Canadian ports experienced a drop in volumes last year and the trend is continuing in 2023.
There isn't as much cargo to move in North America as consumers face increased borrowing costs and many stores have higher inventory levels than usual, said Craig Alexander, a former chief economist with Deloitte and TD Bank.
"The overall economy isn't contracting, but freight activity certainly is. I think the weakness in freight is a precursor to more broad-based weakness in the economy," said Alexander.
Some people are also shifting some of their spending away from buying products to services, such as travel and vacations that weren't possible during the pandemic.
The Rachel Notley government's consumer carbon tax wound up becoming a weapon the UCP wielded to drum the Alberta NDP out of office. But that levy-and-repayment program, and the wide-ranging "climate leadership plan" around it, also stood as the NDP's boldest, provincial-reputation-altering move in their single-term tenure.